No Big Deal About Nigeria’s Stock Market Crash

Prospects for a robust stock market deals in Nigeria are not appearing quite bright till perhaps, after the impending legal tussle between businessman and presidential candidate of the Peoples Democratic Party (PDP), Atiku Abubakar and President Muhammadu Buhari of the All Progressives Congress (APC).

The stock market is most likely to be shaken by political turbulence in the country.

Already, in a seeming response to the collation process of last Saturday’s presidential poll, the Lagos stock market crashed. Insiders say a stock market crash is when a stock index drops severely in a day or two of trading.

The market capitalisation of the Nigerian Stock Exchange (NSE), lost N85 billion in what traders attributed to profit taking in reaction to the trend of the presidential poll which the Independent National Electoral Commission (INEC) eventually announced President Buhari on Wednesday as the winner.

A crash is said to be more sudden than a stock market correction, when the market falls 10 percent from its 52-week high over days, weeks, or even months. While it could be caused by frightened sellers, unexpected economic event, catastrophe or a crisis triggered by panic, in Nigeria, the market, which opened at N12.194 trillion, closed at N12.109 trillion after six hours of trading on Tuesday.

Also, the All-Share Index lost 226.30 points or 0.69 per cent to close at 32,473.82, compared with 32,700.12 recorded on Monday.

The Chief Operating Officer of InvestData Limited, Ambrose Omordion, attributed the market pullback to profit taking embarked by some smart investors, adding that the smart money that pushed the market up with expectations that the opposition would win the presidential election were leaving the market.

Omordion said that some investors who entered the market in anticipation that the opposition’s economic policy would support market growth were taking profit ahead of earnings season: ‘’This pullback may not last as a result of 2019 dividend declaration season as dividend yield of financial service stocks are high and attractive due to low prices.’’

Nestle dominated the losers’ chart, dropping by N70 to close at N1,510 per share. Union Bank of Nigeria trailed with a loss of 60k to close at N6.65, while FBN Holdings was down by 30k to close at N8 per share.

Conversely, Guinness led the gainers’ table during the day, gaining N2.05 to close at N67.15 per share. Dangote Flour followed with a gain of N1 to close at N12.05, while Oando gained 65k to close at N7.25 per share.

Air Services added 60k to close at N7.05, while Africa Prudential increased by 44k to close at N4.84 per share.

A breakdown of the activity chart indicates that the volume of shares traded rose by 46.57 per cent with an exchange of 322.18 million shares worth N2.43 billion in 4,066 deals. This was however, against 219.81 million shares valued at N5.55 billion transacted in 2,999 deals on Monday.

Perhaps, there is no big cause to worry in spite of the fact that once a market becomes volatile, it tends to stay that way for a while.

What is happened or is happening in Nigeria could be as a result of a shift in investor sentiment. But, volatility is not necessary a bad thing when you have a plan. Big corrections are a normal part of an economic cycle.

 

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